Abstract
One of the major analytical and practical issues in the analysis of the open economy is the extent to which governments are able to pursue independent monetary policies. As noted in earlier chapters, one strand of the theoretical literature establishes that a key difference between fixed and floating exchange-rate systems is the degree of monetary independence afforded to governments. The broad conclusions of this theoretical analysis are that when the exchange rate is fixed the domestic monetary counterpart of foreign-exchange market intervention effectively means that the monetary authorities lose control over the domestic money supply. On the other hand, the domestic money supply is largely insulated from external developments with a floating exchange rate.
This is a preview of subscription content, log in via an institution.
Preview
Unable to display preview. Download preview PDF.
Selected Bibliography
Argy, V., and Hodjera, Z. (1973) ‘Financial Integration and Interest Rate Linkages in Industrial Countries’, IMF Staff Papers, Mar 1973.
Argy, V., and Kouri, P. (1974) ‘Sterilisation Policies and the Volatility in International Reserves’, in National Monetary Policies and the International Financial System, ed. R. Z. Aliber (Chicago: University of Chicago Press).
Balbach, A. (1978) ‘The Mechanisms of Intervention in the Exchange Market’, Federal Reserve Bank of St. Louis Review, Feb 1978.
DeGrauwe, P. (1975) ‘Interaction of Monetary Policies in a Group of European Countries’, Journal of International Economics, Aug 1975.
DeGrauwe, P. (1976) Monetary Interdependence and International Monetary Reform (Westmead: Saxon House).
Herring, R., and Marston, R. (1977) National Monetary Policies and International Financial Markets (Amsterdam: North-Holland) chaps 5, 6 and 7.
Holbick, K. (ed.) (1973) Monetary Policy in Twelve Industrial Countries (Boston: Federal Reserve Bank of Boston).
Kouri, P. (1974) ‘International Capital Flows and Portfolio Equilibrium’, Journal of Political Economy, May/June 1974.
Kouri, P. (1975) ‘The Hypothesis of Offsetting Capital Flows: A Case Study of Germany’, Journal of Monetary Economics, 1975.
Kouri, P., and Porter, M. (1974) ‘International Capital Flows and Portfolio Equilibrium’, Journal of Political Economy, May/June 1974.
McKinnon, R. I. (1974) ‘Sterilisation in Three Dimensions: Major Trading Countries, Eurocurrencies and the US’, in National Monetary Policies and the International Financial System, ed. R. Z. Aliber (Chicago: University of Chicago Press).
Miles, C. N., and Bull, P. A. (1978) ‘External and Foreign Currency Flows and the Money Supply’, Bank of England Quarterly Bulletin, Dec 1978.
Neumann, M. (1977) ‘A Theoretical and Empirical Analysis of the German Money Supply Process 1958–1972’, in Monetary Policy and Economic Activity in West Germany, ed. S. Frowen et al. (Guildford: University of Surrey Press).
O.E.C.D. (1975) Role of Monetary Policy in Demand Management: Experience of Six Countries (Paris: OECD).
Porter, M. (1972) ‘Capital Flows as an Offset to Monetary Policy: German Experience’, IMF Staff Papers, July 1972.
Willms, M. (1971) ‘Controlling Money in an Open Economy: The German Case’, Federal Reserve Bank of St. Louis Monthly Review, Apr 1971.
Author information
Authors and Affiliations
Copyright information
© 1980 David T. Llewellyn
About this chapter
Cite this chapter
Llewellyn, D.T. (1980). The Independence of Monetary Policy. In: International Financial Integration. Problems in Economic Integration. Palgrave, London. https://doi.org/10.1007/978-1-349-16474-5_12
Download citation
DOI: https://doi.org/10.1007/978-1-349-16474-5_12
Publisher Name: Palgrave, London
Print ISBN: 978-0-333-21103-8
Online ISBN: 978-1-349-16474-5
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)